searchlore

Back to Resource

All Segments

a16z Podcast | Monetizing Open Source (Or, All Enterprise Software)

a16z Podcast | Monetizing Open Source (Or, All Enterprise Software)

30 segments available

Here’s what we know about open source: Developers are the new buyers. Community matters. And there will never be another Red Hat (i.e., a successful “open core” business model … nor do we necessarily think there should be). Yet open source is real, and it’s here to stay. So how then do companies build a viable business model on top of open source? And not only make money, but become a huge business, like the IBMs, Microsofts, Oracles, and SAPs of the world? The answer, argues James Watters, has more to do with good software strategy and smart enterprise sales/procurement tactics (including design and a service-like experience) than with open source per se — from riding a huge trend or architectural shift, to being less transactional and more an extension of your customer’s team. Watters, who is the SVP of Product at Pivotal (part of VMWare and therefore also Dell-EMC), is a veteran of monetizing open source — from OpenSolaris (at Sun Microsystems) to Springsource (acquired by VMWare) to Pivotal Cloud Foundry — with plenty of failures, and successes, along the way. He shares those lessons learned in this episode of the a16z Podcast with Sonal Chokshi and general partner Martin Casado (who was co-founder and CTO of Nicira, later part of VMWare before joining Andreessen Horowitz). These lessons matter, especially as open source has become more of a requirement — and how large enterprises bet on big new trends.

Segments Timeline

1
0:00 - 0:26
0:26 duration110 words

The Open Source Opportunity

In this segment, Sonal Chokshi introduces the podcast's focus on open source, referencing previous discussions about its challenges and opportunities. She highlights the paradox of significant investment in open source with few successful business models, setting the stage for James Watters to share his insights on monetizing open source effectively.

"hi everyone welcome to the a 6nz podcast I am so know we've talked quite a bit about open source on the podcast already from the topics of open versus closed to managing community and identity to sell..."

2
0:26 - 1:10
0:44 duration162 words

James Watters: A Pioneer in Open Source Monetization

James Watters, SVP of Product at Pivotal, discusses his journey in monetizing open source, sharing his experiences with OpenSolaris and SpringSource. He emphasizes the importance of understanding enterprise needs and how Pivotal Cloud Foundry achieved significant revenue growth, illustrating the potential for successful open source business models.

"conversation we have James waters who's the SVP of product at pivotal a cloud platform company that runs software and multiple clouds and they're part of VMware and it also moderating this podcast we ..."

3
1:10 - 2:02
0:51 duration194 words

Catering to Enterprises vs. Developers

Watters explains the common mistake open source companies make by focusing too much on developers instead of enterprise buyers. He discusses the need for a balanced approach that addresses both communities while emphasizing that successful monetization strategies must prioritize enterprise needs over user enthusiasm.

"out of open source just to give a sense of how real this is pivotal foundry went from zero to 270 million dollars in license not supported licensing in software sales that's the thing we talk about al..."

4
2:02 - 3:02
1:00 duration228 words

The False Horizon of Open Source Monetization

In this segment, Watters critiques the misconception that open source companies should only cater to their user communities. He argues that successful companies like IBM and Oracle have thrived by identifying and capitalizing on major enterprise trends rather than merely commoditizing existing markets.

"projects it had gotten my bumps and bruises along the way and so I had some very particular opinions coming into doing the third round of PCF pivotal Cloud Foundry I think there's there's kind of two ..."

5
3:02 - 4:02
0:59 duration222 words

Identifying Major Trends for Success

Watters discusses the importance of aligning open source strategies with significant enterprise trends, such as microservices. He emphasizes that successful open source companies must not only provide tools but also create solutions that resonate with enterprise buyers, thereby generating interest and purchases.

"and Oracle are not out there mining their mailing lists of end-users to go do deals yeah how do you sort of straddle this because theoretically should be able to do both but isn't so the mantra month ..."

6
4:02 - 5:12
1:09 duration249 words

Beyond Commoditization: A New Market Approach

Watters challenges the notion that open source is merely a commoditizing force. He argues that the most successful software companies have created new markets by leveraging major trends rather than just competing against existing products, highlighting the need for innovative strategies in open source.

"did you do and getting across this first arising the next thing you have to get right is you've got to get a major trend that affects enterprise buyers so if you go back to enterprise as being the sou..."

7
5:12 - 6:14
1:02 duration235 words

The Role of Cloud in Open Source Strategy

Watters explains how cloud technology has transformed open source monetization strategies. He discusses the shift towards continuous delivery and automated updates, which provide additional value to customers and differentiate open source offerings in a competitive landscape.

"open-source to identifying these shifts or is it just like if you're doing a closed source problem let's look at history a little bit I think then an open stock both felt like they could go commoditiz..."

8
6:14 - 7:29
1:15 duration274 words

Service Models and Customer Expectations

In this segment, Watters addresses the evolving expectations of customers regarding software consumption. He emphasizes the importance of offering services that manage software lifecycles and updates, aligning with industry trends towards service-oriented models in open source.

"actually from from my conversations it's almost somewhat of a contrarian view because traditionally you're like open source projects chase after basically the sales dollars that have matured a market ..."

9
7:29 - 9:02
1:32 duration310 words

The Future of Open Source in Enterprise Software

Watters concludes by discussing the relevance of open source in the current enterprise landscape. He highlights the necessity for open source strategies to adapt to changing market dynamics and customer needs, reinforcing the idea that open source is integral to modern software development.

"so the basics are of strategy and segments if your strategy and segment looks wildly different than every other big software companies existed before that's probably a pause yeah and then the second t..."

10
9:10 - 10:02
0:52 duration177 words

Contrarian Bets in Open Source

In this segment, Watters shares insights on making contrarian bets in the open source space, focusing on design and service-like experiences. He discusses the challenges of creating a polished user experience in open source projects and the strategic decisions made to differentiate their offerings in a competitive market.

"sometimes have contrarian bets in them yeah and I would distill our two contrarian bets - we did not go for the commoditization play we went for the the sea change and design play yeah and then we als..."

11
10:02 - 11:01
0:58 duration197 words

Navigating Procurement Politics

Watters delves into the intricacies of navigating procurement processes in enterprise sales. He highlights the importance of understanding procurement dynamics and the need for open source companies to maintain a unique market position to avoid being overshadowed by competitors offering similar solutions.

"room to differentiate there and you know when you when you go to monetize you're gonna need some small check boxes I've learned a lot you know growing this about the importance of packaging for procur..."

12
11:01 - 12:06
1:05 duration239 words

The Importance of Unique Offerings

This segment emphasizes the necessity for open source projects to retain unique offerings in the market. Watters discusses how being the sole supplier can influence pricing and brand awareness, and he warns against the risks of entering a crowded market with multiple similar offerings.

"enterprise when you get to procurement somebody wants you to win yeah and you're actually then in a political process to get through the last mile like they're kind of like the Guardians they mean the..."

13
12:06 - 13:03
0:57 duration229 words

Transactional Relationships vs. Partnerships

Watters contrasts transactional relationships with enterprise clients against more collaborative partnerships. He argues that successful open source companies must integrate deeply with their clients' teams, providing advisory services and support that go beyond mere transactions to foster long-term relationships.

"a project and you're bringing that to market you should retain the ability to be the sole supplier if only to set pricing and brand awareness in the market companies live or die by this type of thing ..."

14
13:03 - 14:17
1:14 duration279 words

Competing with Larger Companies

In this segment, Watters addresses the challenges faced by smaller open source companies when larger enterprises adopt similar technologies. He discusses the importance of positioning and branding to maintain a competitive edge, especially when larger companies attempt to leverage popular open source projects.

"think you can think about it the same way as closed source if you're model is you've sold someone on a big new trend you've helped train their organization to get there and then you're working on a fr..."

15
14:17 - 15:00
0:42 duration142 words

The Valley of Death in Enterprise Sales

Watters shares his perspective on the 'valley of death' in enterprise sales, particularly for open source companies. He discusses the challenges of securing contracts in the mid-range market and the importance of building relationships that extend beyond simple transactions to ensure long-term success.

"or not because I've seen cases where very large orders were suddenly stopped because another large company just quoted something that sounded similar for the same amount now that can happen open or cl..."

16
15:00 - 15:51
0:51 duration165 words

Transactional Relationships vs. Strategic Partnerships

In this segment, Watters contrasts transactional relationships with strategic partnerships in enterprise software sales. He argues that successful companies become an integral part of their clients' teams, especially during significant changes like adopting microservices. This deeper engagement is crucial for securing large contracts and fostering long-term relationships.

"open source project it's probably available online so if you're walking to somebody and you're about to sign a ten million dollar la4 license what's stopping them from just downloading and running it ..."

17
15:51 - 16:44
0:52 duration195 words

Navigating the Valley of Death in Sales

Watters discusses the 'valley of death' in enterprise software sales, particularly for contracts valued between $30,000 and $150,000. He explains how companies struggle to support direct sales in this range, leading to transactional dynamics that hinder innovation. The segment explores how open source can change these dynamics and improve sales strategies.

"dollar transaction comes there as much voting with you know they want you to be part of their extended team part of their strategy part of a relationship with you yeah because you have an expertise th..."

18
16:44 - 17:40
0:56 duration196 words

Open Source as a Catalyst for Change

Watters highlights how open source has become a key factor for large enterprises to embrace new trends. He explains that successful open source companies are now positioned to lead in innovative solutions, driven by the changing landscape of enterprise architecture and customer expectations. This segment discusses the strategic importance of open source in modern software development.

"transactional I'm like so do the dynamics of that change with open source sales I think what's happened is is that open source has become how large enterprises when I bet on big new trends and then th..."

19
17:40 - 18:43
1:02 duration220 words

The Role of Strategic Account Control

In this segment, Watters emphasizes the need for strategic account control in enterprise software sales. He argues that companies must engage deeply with clients to provide valuable advisory services, which can lead to larger contracts. The discussion focuses on how to achieve this level of engagement and the importance of having a robust sales strategy.

"really value that talent on the ground it's just so this is this is a nuance a new way of looking at that discussion so how much does your a CV have to be to support a Salesforce I'd say it has to be ..."

20
18:43 - 19:40
0:56 duration202 words

The Rise of Open Source Companies

Watters explores the emergence of successful open source companies and the factors contributing to their growth. He discusses how the shift towards cloud computing and microservices has created new opportunities for these companies, allowing them to meet evolving customer needs. This segment highlights the changing dynamics in the software industry and the role of open source.

"successful well if you look at the clock cycle of how often big new software companies get built it's not everyday enterprise architecture has only changed so often right if you were to try to sell a ..."

21
19:40 - 20:47
1:07 duration223 words

Customer Expectations and Open Source

This segment delves into how customer expectations have shifted towards open source solutions. Watters argues that the rise of open source is not just a trend but a response to the demands for faster development and community-driven innovation. He discusses the intrinsic benefits of open source and its impact on software strategy.

"here that's inherent to open source by definition fixing problems is fixing problems whether you do it in open source for the source and the reason that we're seeing this rise in open source companies..."

22
20:47 - 21:59
1:11 duration236 words

Trust and Value in Enterprise Software

Watters explains why enterprise software is often expensive, focusing on the trust model between buyers and providers. He discusses the importance of being a trusted advisor and ensuring outcomes for clients, rather than merely providing support. This segment highlights the strategic role of software companies in building long-term relationships with enterprises.

"you keep getting me to talk open-source strategy I'll keep talking software strategy that's great sometimes people say oh well why is enterprise software so expensive it's expensive because you know t..."

23
21:59 - 23:05
1:06 duration221 words

Lessons from OpenSolaris

In this reflective segment, Watters shares his experiences with OpenSolaris and the lessons learned from its open-source strategy. He discusses how misalignment with market trends hindered its success and the importance of having a solid software strategy. This segment serves as a cautionary tale for companies navigating the open source landscape.

"caught that size of a trend even though their prices frankly are similar to Microsoft's now like twenty five hundred dollars an OS so it's not that they're just down market is they just didn't catch a..."

24
23:07 - 23:45
0:38 duration136 words

Microservices and Market Trends

Watters discusses the evolution of software trends, particularly the rise of microservices. He argues that successful companies must not only recognize these trends but also build solutions that address real problems, rather than relying solely on open-source models for success.

"company the problem was that son was still on the wrong side of all the trends like it was actually late to x86 yeah it was late to everything that was happening around web scale and so open-source ac..."

25
23:45 - 24:25
0:39 duration132 words

The Role of Community in Open Source

This segment explores the misconception that simply creating an open-source community will guarantee success. Watters stresses that true value comes from building software that meets enterprise needs and that community development must align with strategic business goals.

"original so Ethan we worked on that and then the next thing I saw was within the spring group there's something called TC server which is just cheaper middleware and it only got to say tens of million..."

26
24:25 - 25:01
0:36 duration118 words

The Shift to Open Source

Watters argues that open source is becoming a normative behavior in enterprise software purchasing. He discusses how companies are increasingly seeking open-source solutions as a protective measure against rising costs from traditional vendors like Oracle.

"like traditional it's like a traditional you know software company in software sales and then you know open source provides you know uplift and etc and often open source has been viewed very different..."

27
25:01 - 25:43
0:41 duration163 words

Navigating Enterprise Licensing

In this segment, Watters explains the complexities of enterprise licensing agreements and how companies are trying to escape the financial traps set by traditional software vendors. He highlights the importance of open source as a means to maintain control over software costs.

"definition you didn't build a software company that had an opportunity to be the big new strategic adviser and that's a critical architecture another thing that I like about your view and all this it ..."

28
25:43 - 26:30
0:47 duration174 words

Choosing Between Open and Closed Source

Watters provides insights for entrepreneurs deciding between open-source and closed-source models. He emphasizes the advantages of open source in today's market and warns against the risks of starting a closed-source company without a unique offering.

"gonna go from the top down bales for us and this is really about kind of top-down like strategy and planning I mean not just kind of progressive community a great thing that's happening is because buy..."

29
26:30 - 27:10
0:40 duration137 words

Advice for Aspiring Entrepreneurs

Watters shares valuable advice for entrepreneurs looking to build successful software companies. He discusses the importance of aligning with existing trends while also being bold enough to innovate and create new solutions that address evolving market needs.

"protective measure even if they don't use it it's the right to keep using their software without paying more and more for it every year yeah companies like Oracle have been out there charging more and..."

30
27:10 - 29:07
1:57 duration438 words

First Principles Thinking

In this concluding segment, Watters emphasizes the need for entrepreneurs to adopt first principles thinking when developing software solutions. He encourages them to focus on fundamental shifts in technology and market dynamics to create impactful innovations.

"a decision to do open source or closed source is there a difference or is it the exact same thing I think we got incredible liftoff of open source for instance IBM showed up and standardized than what..."

a16z Podcast | Monetizing Open Source (Or, All Enterprise Software) — James Watters | Searchlore